840-450 · Question #35
Which definition of gross profit is true?
The correct answer is C. income that remains after considering the cost of goods sold. Gross profit is calculated by subtracting the cost of goods sold (COGS) from revenue - making C the correct definition. It represents what a business earns before deducting operating expenses, showing how efficiently a company produces or acquires its products. A describes financ
Question
Which definition of gross profit is true?
Options
- Afinancial consequences of investments and actions
- Bcapital and operating expenditures
- Cincome that remains after considering the cost of goods sold
- Dadministration and sales expenses necessary to run day-to-day operations
How the community answered
(26 responses)- A4% (1)
- C92% (24)
- D4% (1)
Explanation
Gross profit is calculated by subtracting the cost of goods sold (COGS) from revenue - making C the correct definition. It represents what a business earns before deducting operating expenses, showing how efficiently a company produces or acquires its products.
- A describes financial results from investments/decisions - closer to concepts like ROI or net income impact, not gross profit.
- B describes types of expenditure classifications (CapEx vs. OpEx), which are budgeting concepts unrelated to a profit figure.
- D describes operating expenses (SG&A), which are subtracted after gross profit to arrive at operating income.
Memory tip: Think of "gross" as the raw profit - revenue minus only what it directly cost to make or buy the product, before any overhead gets touched. The formula is simply: Gross Profit = Revenue − COGS.
Topics
Community Discussion
No community discussion yet for this question.